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$3-Billion, 99-Hospital Merger Near : Health care: Columbia and Galen sign accord to create the nation's second-largest such management company.

June 11, 1993|From Reuters

ATLANTA — Columbia Healthcare Corp. and Galen Health Care Inc. jointly announced the signing of a merger agreement Thursday, creating the second-largest U.S. hospital management company.

The stock deal is worth $3 billion, a Galen official said.

The new company, with assets of $4.5 billion, would own and operate 99 hospitals with 22,000 licensed beds in 19 states and two foreign countries. The new company's annual revenue is expected to exceed $5 billion.

The merged company would be second in size only to HCA-Hospital Corp., said Galen investor relations director Richard Lechleiter. Galen is based in Louisville, Ky.

"We think the combined companies can grow faster than they could apart," he said.

The move would save $30 million annually on Galen's national purchasing contracts and credit access by eliminating duplicate administrative costs.

The deal was announced after the close of trading on the New York Stock Exchange. Galen shares, which had closed up 12.5 cents at $14.125 in NYSE trading, jumped 87.5 cents to $15 in Pacific Stock Exchange late trading. Columbia was off 25 cents at $25.50 in NASDAQ trading.

The deal is expected to be completed in September.

Ft. Worth, Tex.-based Columbia would change its name to Columbia Health Care Corp., and the combined company would apply for a listing on the New York Stock Exchange.

Under terms of the deal, Galen shareholders would receive 0.775 shares of Columbia common stock for each Galen share held, bringing the number of Columbia's common shares outstanding to 150 million, the companies said.

The combined company would be based in Louisville and would be 82%-owned by current Galen shareholders, Lechleiter said.

Columbia Chief Executive Richard Scott said in a statement that the "transaction should add to earnings per share in both 1993 and 1994."

Galen Chairman Carl Pollard, who is expected to chair the new company, said the new company's balance sheet would be significantly stronger than Columbia's current one.

Scott is expected to be named president and chief executive.

The merger is subject to receipt of a tax ruling from the Internal Revenue Service or counsel regarding tax consequences of the transaction and shareholder approval, which is expected in September.

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